Heat the oven to 160 C / 320 F with a rack in the lower third. Pat the lamb dry with paper towels and season it all over with 1 1/2 tsp of the salt and the pepper.
Heat the olive oil in a 28 cm / 11-inch Dutch oven over medium-high heat. Brown half the lamb for 7 to 8 minutes, turning with tongs, until all sides are deep brown. Move it to a plate and brown the second batch the same way.
Spoon off all but 2 tablespoons of fat from the pot. Lower the heat to medium, add the onions and the remaining 1/2 tsp salt, and cook for 6 to 7 minutes, stirring, until soft and golden at the edges. Add the garlic and cook for 1 minute until fragrant.
Pour in the wine and scrape up the browned bits from the bottom of the pot. Simmer for 3 minutes until reduced by about one third. Return the lamb and any juices to the pot, then add the water, bay leaves and half of the dill. The liquid should come about halfway up the meat. I hold the other half of the dill back because dill that cooks for hours turns dull and loses its fresh taste.
Cover with the lid and bake for 2 hours 15 minutes. Check one piece with a fork. The meat should pull away from the bone easily and read about 90 C / 195 F in the thickest part.
Remove the lid and bake for 20 more minutes, until the tops of the lamb pieces are browned at the edges and the sauce looks slightly thicker.
Take the pot out of the oven, remove the bay leaves, and let it rest, loosely covered, for 15 minutes. Skim the fat from the surface with a wide spoon, stir in the remaining dill, then taste the sauce and add a pinch of salt if it needs it. Serve in wide bowls with the sauce spooned over.